On Friday a London employment tribunal ruled that drivers for taxi app Uber are considered workers and will be entitled to holiday pay, paid rest breaks and the national minimum wage - among other rights.

The ruling means drivers are also covered by the Working Time Regulations, so will be entitled to rest breaks, have protection from discrimination and cannot be dismissed for whistleblowing.

The case is the first to examine the key premise underpinning the ‘gig economy’: that people who work via apps are independent and not employed by any company. The verdict casts significant doubt on the business model behind gig economy tech platforms like Uber, which connects workers with customers without employing the staff themselves.

The decision will affect some 30,000 drivers in England and Wales, and has far-reaching consequences for Uber and the ‘gig economy’ as a whole. On hearing the judgement Uber said immediately that it would appeal against it.

‘Substance over form’

A long-established principle in such cases is that the courts consider employment status to be a question of ‘substance over form’. It’s the reality of the arrangement between the company and the individual that counts, not what is drafted into a contract or agreement.

Two drivers, James Farrar and Yaseen Aslam, raised the case on behalf of a group of 19 Uber workers – a key term here as the group did not argue they were employees, choosing the term workers instead.

Farrar told the court he was under tremendous pressure to work long hours and accept jobs. He also outlined the repercussions from Uber if he cancelled a pickup. Some months he earned as little as £5 an hour – below the £7.20 minimum employers are now obliged to pay workers aged over 25.

Uber argued that its drivers were not workers but self-employed contractors. The San Francisco-based company also stated that it was a technology firm not a transport business, and that its drivers were independent, self-employed contractors who could choose where and when they worked.

Landmark ruling

This landmark ruling of course leads other firms with large self-employed workforces to consider the reality of their position too.

According to the Guardian’s report on this decision, research by Citizens Advice suggests that as many as 460,000 people could be falsely classified as self-employed, costing up to £314m a year in lost tax and employer national insurance contributions.

Similarly, takeaway firm Deliveroo made the news in July after reports of a clause in its agreements with couriers that they will not bring a legal claim challenging their employment status. However, employment law experts have suggested that the clause is unenforceable.

The Uber verdict comes amid rising interest from government about the recent trend towards self-employed working. The government is about to commence a six-month review of modern working practices, and HMRC has recently announced a new compliance team focused on 'gig economy' workers

What happens now?

The ruling is not the end of the process for Uber. The firm will take the case to the employment appeal tribunal, and following its decision there could be further hearings in the court of appeal and then the Supreme Court. Any payments due to drivers will not be calculated until that process is over.

Uber drivers who wish to make a similar complaint should contact the GMB union or their local tribunal about their claim as soon as possible.

If you have any doubts about the status of individuals working in your organisation, your first port of call is the government’s employment status overview page.

Discussion of the ruling has already started on Any Answers. Have you fielded any questions from confused clients or employees?

About Toni Trevett

Toni is the founder of CompleteHR Ltd, and is the company's lead consultant and trainer. She specialises in the broad area of management development training including the skills of people management and HR .

End result will be fewer jobs and higher fares (that cost has to go somewhere), but will be interesting to see how many Uber drivers have failed to declare their second income from this...maybe HMRC should open an enquiry and link all 30,000 drivers to their records- I'm sure the GMB will happily pay for the costs? After all, they want them to be happy employees, let's make sure they all met their responsibilities first then bring them on board.

There are probably two types of drivers- the full time ones who act more like employees, and the part timers who have no wish to be classed as employees. This ruling runs roughshod over all that.

I expect the ruling will be watered down or overturned higher up the chain. The drivers work their own hours, determine which jobs to take, supply their own vehicles, petrol, insurance, etc. What is going to happen if they are employees? Claim all those costs against their salary? Good luck with that.

I suspect the workers taking the case haven't really thought through all the consequences of being an employee rather than being able to recover their expenses as a self employed person can.

"consequences of being an employee" they have not been classed as "employees", but "workers" entitled to certain benefits conferred by the 1996 Employment Act.

It is interesting that this judgement appears to "preserve" HMRC's position in that an individual can be taxed as an employee, whilst not necessarily being classed as an employee. However, this case could undermine HMRC's position.

I contend that this case will have some effect on the upcoming legislation for applying IR35 to public sector workers.

The issue for some drivers appears to be the pressure they FELT they were under from Uber, the supplier of the software site, such that Uber are trying to protect their business, their reputation as a reliable source of transport. If drivers don't bother turning up, all the time, Uber loses reputation. Uber presumably don't like drivers backing-out of arrangments.
It seems to me this is a standard feature of a franchise arrangement. You need a contract to ensure the driver who accepts a client under the Uber franchise, commits to fulfill that arrangement, hence drivers who take-on too much work falling foul.
If the driver can't make more than £5 per hour, then don't take-up the franchise.
So franchisee as employee? I don't think so.
My daughter has started doing the occasional deliveroo, I shall see how she gets on. Please don't throw the baby out with the bathwater. It would be good for these franchises to be able to continue, "gig economy" may be a modern term for it, but it has always existed.

Well, looks like this will be a 1up for black cab drivers. If its ruled they are employed I bet we will see a dramatic decrease in uber drivers around London and that can only mean black cab drivers will see an increase in fares. It's about time something was done, it's shocking what black cab drivers have had to go through due to ubers dominance over the market.

Currently Black Cab drivers are self-employed, following this ruling will they next be open to attack. Since they are regulated by tfl they too could be empaloyees by reason of the fact that they cant work if they are not licenced by one authority. Not sure how their circumstances are now different from uber.

Its not really about the governing authority, its more about the restrictions that authority puts on your ability to work. Uber has restrictions on job cancellations and time off leading many to feel they are not self-employed.

My concern: how this will affect employment for my clients? Many have moved from traditional private hire companies to Uber. If they do become employed, how many will accept the new work regulations Uber will most likely impose if their appeal fails?

What happens now?
Won't these "gig employers" form a plan such that if the Uber appeal goes against them they restructure so all drivers are obliged to provide their services via a personal services company.

If taxi drivers who supply their own vehicles and choose what shifts to work aren't self-employed (basically just using the services of a central dispatcher - human or otherwise - in return for a "fee"), who is?

Having driven many people into self-employment, from which I suspect few make legislated minimum pay, is not the government obliged to sort out the mess it has created when firms like Uber take such colossal advantage of those least able to resist their pressure? Your comments are a justification for abuse by Uber of their drivers and unfair competition vis-a-vis black cab drivers so that Uber can make a pile.

I expect it will end up like carers in the community, the carer that goes to my dad says she sometimes only gets about 40p for a visit, she only gets paid from the time she enters and phones the agency to the time she leaves and phones the agency, not for travelling time to the next 'job'. So I expect Uber will do the same, only paid 'per hour' from the time of pick up to time of drop off, no pay in between fares ('jobs').

I think this article may be misleading - there is a very good reason why the tribunal looked at them as workers not employees. The Tribunal expressly found that they were not employees but "limb (b) workers". The significance for tax purposes is of course that although such workers do have employment rights, payments made to them are not subject to PAYE and NIC obligations.

A crazy decision that is likely to be overturned on Appeal.
Uber provide a App that matches a customer with a self employed driver - any sensible person can understand that. If the 16 unhappy drivers dont like it then why not just do something else? Nobody forces them to work with Uber.
I wonder if Black Cabbies consider themselves 'employed' by the TaxiCall App............I doubt it.

By your definition (and that is also stated by UBER) there is also another concern. UBER connects the driver and passenger through an app. There is no pre-booking involved. This means that the app is providing a digital version of "hailing" a taxi...

UBER drivers are currently licenced under private hire licences. Private Hire are not allowed to "hail". they are only allowed to pick up pre-booked customers. So currently under the ruling, all UBER drivers have been working illegally as far as the councils are concerned.

I just love that word "worker". I wonder where it originated from, oh yes, silly Euroland. They decided that a "worker" could have holiday pay etc. I think the first case were construction workers seeking holiday pay but still wanted to be self-employed. I really do hope this gets overturned and the word "worker" gets kicked out along with the rest of the EU "madness".

According to the government's employment status overview page a "worker" is someone who has "to turn up for work even if they don’t want to" but also where "the business doesn’t have to offer them work and they don’t have to accept it - they only work when they want to".
Toni; can you please help with this conundrum - as maybe others are finding it confusing.

I've read several similar articles on different sites. However, none of them cover whether or not this will have an impact for auto-enrolment, i.e. will they be defined as "job holders" under PA 2008? Does anyone have any views on that please?

That is a very good point Paul.
Normally the SE will make their own arrangements about pensions, however there could be a new breed of "worker" that think they could get the best of both worlds and we all know which way the employment tribunal will go.

@Paul
If it is upheld that they are "workers", then Uber will have 'employer duties' under the Auto Enrolment regulations, including complying with the Safeguarding aspects and the provision of other information. Whether the drivers are "jobholders" will depend on them meeting the jobholder criteria or not. I'm guessing that most will be over 21 so it will be only the earnings trigger criterium that needs to be met to trigger auto-enrolment. It will be interesting to see what pay reference period they have!